Dr. Dre's Beats Electronics Has Upended the Tech Industry
Beats founders Jimmy Iovine, left, and Dr. Dre, with company president Luke Wood
PHOTO COURTESY OF BEATS BY DR. DRE
In October 2003, long before Beats by Dre headphones, Dr. Dre popped in via iChat to one of Steve Jobs' classic black-turtlenecked Apple product launches. Jobs was onstage in San Francisco, unveiling the first version of iTunes for Windows. Dre was at the studio in L.A., ostensibly working on his (still unreleased) solo album, Detox. The digital image of Dre's head floated above the stage.
"No more carrying around duffle bags full of CDs," Dre said to Jobs. "I know a lot of kids get their new music online...so iTunes is a way for them to [do it] in a legal way." The crowd applauded. Jobs smiled.
Ten years later, Jobs is no longer with us, but Apple is about to make Dr. Dre one of the richest African-American men in history (if not the richest). Just months after the launch of streaming-music service Beats Music, it was reported that Apple would pay $3.2 billion to acquire Beats Electronics, the company Dre started in 2008 with music mogul Jimmy Iovine. The proposed deal is the largest acquisition in Apple's history.
At press time the deal hadn't gone through, but if it does, one thing is clear: Beats is L.A.'s first bona-fide tech giant. Sure, L.A. has satellite offices of big tech companies including Google, Yahoo and YouTube, and has fostered tech startups such as MySpace and Snapchat. But this would be the biggest thing yet to happen to Silicon Beach.
Before Apple was in the picture, it was clear that Beats wanted to shift from simply a consumer electronics company to a sexy media ecosystem.
How do you become a media ecosystem? First you have to make digital technology, preferably software, which Beats started in January by launching Beats Music, a streaming-music service that shares functions with Spotify and Pandora.
Then you need a cutting-edge, high-tech campus, and Beats now has one in Culver City. Its 110,000-square-foot, $39 million, 450-employee compound sprawls over four buildings in the shadow of the Baldwin Hills Scenic Overlook. The work spaces are high-ceilinged and open, like airplane hangars, in the style that cubicle-phobic tech companies often favor. From the floor-to-ceiling panel windows rises a big green Baldwin hill; you can see hikers climbing it like tiny termites.
The campus had its soft opening earlier this month. It features a custom gym designed, in part, by LeBron James' personal trainer, Mike Mancias; a full outdoor basketball court; a Stumptown Coffee bar with a full-time barista; and — not to be outdone by Google's Bon Appetit–reviewed cafeteria — a Wolfgang Puck restaurant to serve lunch. Employees gain access to certain parts of the buildings via retinal scanner, and there's a "creative collaboration space," with a tree growing in the middle of it, to provide inspiration.
Beats' new digs can't rival the headquarters of Apple or Google in its expansiveness or creative gadgetry; what it lacks in communal bicycles and nap pods, it makes up for in location. Instead of Silicon Valley, Beats chose to stay home and be the big fish at the WorkSpace at the Hayden Tract, an innovative development designed by experimental architect Eric Owen Moss. The location is already a cluster of hot media, tech and advertising companies, including Maker Studios, Anonymous Content, Ogilvy, Popsugar and Media Temple.
Designed by L.A. architect Barbara Bestor, the Beats campus looks fairly bland from the outside; the four Beats buildings have gray, square façades. Inside, however, Bestor's vision becomes more apparent — the aforementioned indoor trees, the wide view of the hills, the glass-enclosed atrium and wood-paneled coffee counter. A 7-foot-11-inch touchscreen greets you upon entrance, and there's a stairwell gilded in gold.
Apple is notoriously silent concerning its dealings, and the unfinished Beats deal has put a damper of silence over what should have been Beats' celebratory unveiling of its new campus. Beats' publicists demanded that anything said on a campus tour be off the record, and promised interviews with top brass failed to materialize.
In fact, buying Beats seems so wildly out of character for Apple that many wondered whether it would actually happen. That is, until Dre, in a quickly yanked Facebook video earlier this month, confirmed the news in a way that only he could.
"The first billionaire in hip-hop, right here from the motherfucking West Coast. Believe me," an elated, drunk Dr. Dre said, pointing right into a camera operated by singer Tyrese, who was so excited that he broke out into a spontaneous Crip walk.
But not everyone is so bullish on this deal.
"Every audiophile in the world castigates [Beats headphones] for their bass-heavy frequency response," music industry guru Bob Lefsetz says. "Jimmy [Iovine] has created nothing other than wealth. The headphones are mediocre and Beats Music is a me-too service."
A monthly fee of about $10 allows you to stream any song from Beats Music's large library and also provides curation tools that allow for new music discovery. One neat feature allows you to generate a personalized "radio station" by completing sentences such as: "I am in the shower and feel like starting a riot with a stiff drink to punk," or "I am at the computer and feel like drifting off to sleep with my pets to old-school hip-hop."
Although it receives similar reviews to Beats headphones — pretty to look at, glitchy to use — many analysts believe Beats Music, not the headphones, is the reason behind Apple's interest. iTunes released its own streaming music service, iTunes Radio, last September as a part of iOS 7, and by March, it was the third most popular streaming music service in the United States. But its popularity likely was due to its integration into Apple software, and the service itself received poor reviews and hasn't really taken off.
Beats Music, meanwhile, is almost surely not profitable but has proven critical to Beats Electronics' appeal.
"Beats wanted to become a part of another platform, one that you never have to leave," says Joe Speicher, a Columbia-trained economist and San Francisco web entrepreneur. "Beats had to brand themselves as an ecosystem in order to be acquired by a larger ecosystem." Add in Iovine's music industry connections, plus Beats' new, tech-y L.A. location, and it becomes clear why Apple would be enticed.
All of this has happened very fast. Founded in 2008, Beats began as a small operation in an office at Santa Monica's Water Garden complex. Iovine, already well established as the Ari Emanuel of music, tapped Dre to help create a line of high-end branded headphones. Disappointed with how music was heard in the digital age (through Apple's ubiquitous white earbuds, for example), they wanted to create a high-quality product that would more accurately reproduce sound.
This is the official Beats history, in any case; according to others, Iovine is simply a marketing mastermind who saw a branding opportunity and used Dre's name to make his headphones a hip-hop fashion statement.
The fact that Beats likely does not own much in the way of proprietary technology seems to be at odds with Apple's usual acquisition model.
In any case, if the Apple deal goes through, Iovine and Dre's project will have become much more than headphones, bigger than a music app, bigger, even, than the music industry itself. One thing is clear: Silicon Beach has finally caught its first big fish.
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